Ifc To Invest $10 Million In Srei Infra Subsidiary

The International Finance Corporation (IFC) will invest $10 million in SREI International Finance Corporation's subsidiary Indian Infrastructure Equipment Ltd (IIEL).

Along with the private sector lending arm of the World Bank, the Netherland-based lending institution FMO and DEG of Germany will also provide capital to IIEL, which will have an initial corpus of around $40 million. IIEL will maintain a wide range of infrastructure construction equipment and lease it to contractors.

"IFC will invest $3.2 million for a 20 per cent stake in IIEL and extend $6.8 million in the form of long-term loans to the venture," IIEL chairman and managing director, Sunil Kanoria said at the signing of the arrangement between IFC and SREI today.

The company has obtained the Foreign Investment Promotion Board (FIPB) approval for the venture, Kanoria said. With IFC signing the agreement, the other foreign agencies are expected to ink the deal within a month, he said.

FMO would invest $7 million, while DEG would offer Euro 5 million, he said. With these investments, the company's equity would be about $15 million, while the remaining $25 million would in the form of debt and convertible debt.

SREI would bring in $5 million (33 per cent) in the form of equity into the venture, which will get a $6 million from the Infrastructure Development Finance Company.

IIEL would acquire, store, maintain and rent the entire range of infrastructure equipment, especially in the road and power sector. The company plans to procure and deploy equipment worth over $40 million over the next 12 to 18 months, Kanoria said.

The company has firmed up strategic alliances with international equipment manufacturers including Caterpillar, Svedala, Volvo, L&T, Komatsu, Tatra, Ingersoll Rand, and Wirtgen. It also has tied up with domestic companies including Telco Construction Company, Escorts-JCB, Greaves and Gujarat Apollo.

IFC's outgoing regional director (South Asia) Bernard Pasqier said India's infrastructure sector was still in a nascent form but demand for infrastructure equipment has been growing in the past years with the government taking steps to develop the sector.

"Equipment banks are big business in the US and we hope to see the same in India over the years," he said.